Correlation Between Patrick Industries and Crown Crafts

Can any of the company-specific risk be diversified away by investing in both Patrick Industries and Crown Crafts at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Patrick Industries and Crown Crafts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Patrick Industries and Crown Crafts, you can compare the effects of market volatilities on Patrick Industries and Crown Crafts and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Patrick Industries with a short position of Crown Crafts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patrick Industries and Crown Crafts.

Diversification Opportunities for Patrick Industries and Crown Crafts

0.71

Correlation Coefficient

Patrick Industries  Crown Crafts

Poor diversification

The 3 months correlation between Patrick and Crown is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Patrick Industries and Crown Crafts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Crafts and Patrick Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Patrick Industries are associated (or correlated) with Crown Crafts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Crafts has no effect on the direction of Patrick Industries i.e., Patrick Industries and Crown Crafts go up and down completely randomly.

Pair Corralation between Patrick Industries and Crown Crafts

Given the investment horizon of 90 days Patrick Industries is expected to generate 2.56 times more return on investment than Crown Crafts. However, Patrick Industries is 2.56 times more volatile than Crown Crafts. It trades about 0.05 of its potential returns per unit of risk. Crown Crafts is currently generating about -0.02 per unit of risk. If you would invest  12,578  in Patrick Industries on August 31, 2024 and sell it today you would earn a total of  864.00  from holding Patrick Industries or generate 6.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Patrick Industries  vs.  Crown Crafts

Patrick Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Patrick Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Crown Crafts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Crafts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Crown Crafts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Patrick Industries and Crown Crafts

The main advantage of trading using opposite Patrick Industries and Crown Crafts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patrick Industries position performs unexpectedly, Crown Crafts can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Crown Crafts will offset losses from the drop in Crown Crafts' long position.

The idea behind Patrick Industries and Crown Crafts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.